How Russia and Iran are replacing the dollar

SHAFAQNA – Tehran and Moscow seem very determined to ditch the U.S. dollar in their bilateral trade transactions.

The two countries, which are subject to a series of international sanctions, have already started to realize the mechanism to get rid of the dominance of the dollar in trade exchanges, as per agreed earlier.

Bank officials in Tehran said on April 26 that a mechanism to transfer money to the country’s banks from Russia is now on stream.

Gholam-Reza Panahi, the deputy governor for currency affairs of Bank Melli of Iran said the mechanism enables Iranian exporters to transfer payments in rubles from their Russian clients to Iran through the Moscow-based Mir Business Bank.

The EU, the U.S. and the United Nations set in place sanctions against Iran’s banking system over its nuclear program and since the Islamic Republic has been forced to barter its oil with goods in trade with China and India. Russia has also been hit by the U.S. and EU sanctions over the Ukrainian crisis.

Panahi said BMI is ready to support Iranian exporters to receive payment in rubles through Mir Business Bank, IRNA reported.

He said Iranian exporters can even choose the same bank for opening letters of credit.

Earlier, an Iranian official said Russia and Iran also plan to create a joint bank.

However, some experts believe that the ruble/rial trade would isolate Iran’s economy more.

Initially, the switch to rubles and rials was raised in Astana, Kazakhstan, on the sidelines of the 11th meeting of the Shanghai Cooperation Organization (SCO) in 2011 by Russia’s former President Dmitry Medvedev at a meeting with his Iranian counterpart, Mahmoud Ahmadinejad.

But the sides failed to come to an agreement and the issue was handed over to both nations’ successors, Hassan Rouhani and Vladimir Putin.

Russia-Iran trade is currently worth $5 billion a year. A so-called oil-for-goods contract also has long been discussed, by which Moscow would buy oil from Tehran and export products and expertise in machinery, rail, trucks, metals and grain.

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